Garnishment of Accounts Containing Federal Benefit Payments Frequently Asked Questions
NOTE: Economic impact payments under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (second round) are exempt from garnishment. These economic impact payments are generally treated in the same manner as federal benefit payments that are exempt from garnishment, but there are some differences. Financial institutions are advised to consult with their legal counsel on this topic if they have questions.
The Department of the Treasury, the Social Security Administration (SSA), the Department of Veterans Affairs (VA), the Railroad Retirement Board (RRB) and the Office of Personnel Management (OPM) are issuing a Final Rule (31 CFR Part 212) to amend their regulations governing the garnishment of certain exempt federal benefit payments that are directly deposited to accounts at financial institutions.
Specifically, the exempt federal benefit payments include: Social Security payments, Supplemental Security Income (SSI) payments, VA benefits, Federal Railroad retirement benefits, Federal Railroad unemployment and sickness benefits, Civil Service Retirement System benefits and Federal Employees Retirement System benefits.
A list of federal benefit payments disbursed by Treasury that are protected under the rulemaking is provided in Appendix One of the Guidelines for Garnishment of Accounts Containing Federal Benefit Payments at Garnishment Guideline June 2013.
Download Garnishment Guidelines June 2013
Treasury will encode "XX" in positions 54-55 of the Company Entry Description Field and "2" in the Originator Status Code Field of the Batch Header Record of the direct deposit entry. The garnishment exemption identifiers encoded in the Company Entry Description Field can be used to identify exempt federal benefit payments both in an automated processing environment and in an environment in which the financial institution relies on a visual search. In the instance of a visual search, the financial institution will rely on the exemption identifiers printed on the account statement.
In response to requests for guidance on calculating the protected amount, the agencies have revised the definition of the protected amount to provide that the account balance to be used in the calculation is the balance when the account review is performed.
Therefore, the account balance will include intraday items, such as ATM or cash withdrawals or deposits, already posted that day. The final rule defines the "protected amount" to mean "the lesser of (i) the sum of all benefit payments posted to an account between the close of business on the beginning date of the look back period and the open of business on the ending date of the look back period, or (ii) the balance in an account when the account review is performed."
In Appendix C, there are five examples illustrating how the protected amount is determined under the Final Rule. The examples have been revised to reflect the change made to the definition of the protected amount and to indicate when a notice is required to be sent.
Yes. The agencies amended section 212.6(h) of the Final Rule to provide financial institutions with an opportunity for up to five business days after the account review is performed to impose a garnishment fee if non-benefit funds are deposited.
Before charging a garnishment fee, financial institutions are required to determine that the garnishment fee does not exceed the amount of the non-benefit deposited funds.
The agencies believe that financial institutions should not be permitted to collect a fee from the protected amount and, therefore, have not amended that provision of the Final Rule.
The Final Rule requires financial institutions to send the notice required by section 212.6(e) if the following three conditions exist: 1) a benefit payment has been directly deposited to the account during the look back period; 2) the financial institution has established a protected amount; and 3) there are funds in the account in excess of the protected amount that will be subject to the garnishment.
The agencies have revised the definition of a garnishment order in the rulemaking to include levies and orders issued by a State or a State agency or municipality. Tax levies issued by the Internal Revenue Service are not subject to the Final Rule.
While the garnishment of SSI payments is not addressed as part of the Final Rule, the agencies have included a discussion of this issue in the preamble.
The agencies reference the U.S. Department of Health and Human Services Office of Child Support Enforcement (DHHS OCSE) instructions that direct State child support enforcement agencies not to serve orders on financial institutions to garnish SSI payments.
The guidance references 42.U.S.C. 659 which stipulates that SSI payments are not subject to garnishment. For additional information on SSI payments, see Dear Colleague Letter (DCL-13-06) (February 27, 2013) and the Fact Sheet "Garnishing Federal Benefits for Child Support".
Yes. In the preamble, the agencies state that DHHS OSCE has provided public information that VA payments generally are not subject to garnishment.
Specifically, federal payments subject to garnishment by child support enforcement agencies under 42 U.S.C. 659 are limited to payments based on remuneration for employment. This does not include VA payments other than those representing compensation for a service-connected disability paid to a former member of the Armed Forces who is in receipt of retired or retainer pay and who has waived a portion of the retired or retainer pay in order to receive such compensation.
For additional information on VA payments, see Office of Child Support Enforcement / Department of Veterans Affairs, Income Withholding and Veteran's Benefits, Guides/Publications/Reports (March 1, 2012) and see 42 U.S.C. 659(h)(1)(A)(ii)(V).
We note that an individual who receives VA payments can still challenge in court the garnishment of those payments for child support obligations and assert the protections of 38 U.S.C. § 5301(a) in the event a State child support enforcement agency serves a garnishment order on a financial institution.
In the preamble, the Agencies state that in situations where a financial institution has made a determination not to take any action affecting an account as a result of the receipt of a garnishment order, then the procedures in the Final Rule need not be followed.
Take, for example, a financial institution operating in a State that has established in law a minimum protected amount of $3,000.00, receives a garnishment order for $2,500.00. If the balance in the account being reviewed is $2,750.00, and the financial institution determines that no action related to the garnishment order will be taken against the account holder, the procedures under the Final Rule are not triggered and the financial institution would not follow the Final Rule's procedures.